6. Investments in subsidiaries and joint ventures
Note 6.1 Subsidiaries and joint ventures
|In the financial statements of the Company, subsidiaries are those entities which are directly controlled by the Company.|
In the financial statements, investments in subsidiaries, which are not classified as available for sale, are measured at cost plus any granted non-returnable payments, including for the coverage of losses presented in the financial statements of a subsidiary, less any impairment losses. Impairment is measured by comparing the carrying amount with the higher of the following amounts:
- fair value, less costs to sell; and
- value in use.
The Company holds interest in joint ventures which are joint contractual arrangements, in which the parties sharing control have the right to the net assets of a given entity. Interest in joint ventures is initially recognised at cost, and as at the end of subsequent reporting periods it is recognised at cost, less impairment losses.
|As at 1 January||6 858||11 778|
|Acquisition of shares or of newly-issued shares||4||61|
|Recognition of impairment losses||(4 856)||(4 928)|
|Other||( 4)||( 53)|
|As at 31 December||2 002||6 858|
The most significant investments in subsidiaries (direct share)
|Entity||Head Office||Scope of activities||Carrying amount of shares/investment certificates|
|FUTURE 1 Sp.z o.o.*||Lubin||management and control of other companies, including the KGHM INTERNATIONAL LTD. Group||-||4 770|
|"Energetyka" sp. z o.o.||Lubin||generation, distribution and sale of electricity and heat||505||505|
|KGHM Metraco S.A.||Legnica||trade, agency and representative services||335||421|
|KGHM I FIZAN||Wrocław||cash investing in securities, money market instruments and other property rights||437||377|
*In 2016 the international part of the KGHM Polska Miedź S.A. Group’s structure was simplified by merging the Polish company Future 1 Sp. z o.o. (as acquirer) with the Luxembourg company Fermat 1 S.á r.l.
As at 31 December 2016 and as at 31 December 2015, the % of share capital held as well as the % of voting power in the above-mentioned subsidiaries was 100%.
Note 6.2 Receivables due to loans granted
|Accounting policies||Important estimates and assumptions|
|Assets classified, in accordance with IAS 39, in the category of “loans and receivables” are initially recognised at fair value and are measured at the end of the reporting period at amortised cost using the effective interest rate method, including impairment.||The terms of repayment of loans granted to finance operations abroad, including planned repayment dates, were set in individual agreements. Pursuant to the current schedule, the repayment was set at years: 2019 (USD 219 million), 2021 (USD 329 million) and 2024 (USD 1 201 million). The start of repayment of loans by the ultimate beneficiary owners: Sierra Gorda S. C. M., KGHM INTERNATIONAL LTD. and KGHM AJAX MINING INC. will depend on their financial standing.|
|As at 1 January||6 755||2 046|
|Loans granted – cash transferred||834||4 245|
|Allowance for impairment||(1 130)||-|
|Other||( 9)||( 13)|
|Total changes||575||4 709|
|As at 31 December||7 330||6 755|
|non-current receivables||7 310||6 750|
The most significant items are loans granted to the companies of the KGHM Polska Miedź S.A. Group, connected with the realisation of mining projects executed by indirect subsidiaries of KGHM Polska Miedź S.A.: KGHM INTERNATIONAL LTD. and KGHM AJAX Mining Inc.
As a result of conducted impairment testing of mining assets, the Company recognised an allowance for impairment of loans granted to subsidiaries advancing mining projects, in the amount of PLN 1 130 million (Part 3).
The loans’ interest rate is fixed and therefore they are exposed to changes in fair value. In the financial statements the loans are measured at amortised cost, however, as at 31 December 2016 as well as at 31 December 2015 the fair value of loans granted was equal to their carrying amounts.
Interest on loans granted in 2016 amounted to PLN 376 million (in 2015: PLN 226 million) and was recognised in other operating income (Note 4.2).